In a mega pharma deal, Sun Pharma will be acquiring Ranbaxy in a transaction worth USD 4 billion . Speaking to CNBC-TV18 regarding the acquisition, Uday Baldota of Sun Pharma says the deal will strengthen Sun Pharma's presence in several markets.
According to Baldota, a large part of pharma growth is expected to come from emerging markets going ahead. The countries where Ranbaxy has a fairly strong presence, Sun Pharma has relatively modest presence and so, the deal will help in utilising each other's strengths. "Sun Pharma is very excited about the overall spread of business that it will be getting in this combination," Baldota adds.
The company's emerging markets sales will be close to USD 1 billion post the deal. Combined entity of Sun Pharma-Ranbaxy will have presence in 55 markets.
The deal will not only make Sun Pharma India's largest pharma company but also, biggest Indian Pharma company in the US market. The transaction is expected to close by December 2014
Below is Uday Baldota's interview with Latha Venkatesh, Sonia Shenoy and Ekta Batra on CNBC-TV18.
Latha: Are you completely indemnified against the subpoena issues that may arise for Ranbaxy?
A: I think the issue here is that it they have received it recently and so, it is a beginning of asking for some data and it is very difficult to say how and when this will develop. We have attempted to work together with all the parties here and see that there is some kind of protection and sharing across the party. Beyond that it is very difficult for us to give any specific details.
Latha: Will sharing mean some bit of responsibility could stick with you?
A: Certain costs and expenses, which is already mentioned in our press release.
Latha: How much does it mean, would a large part be indemnified and taken on by the Daiichi?
A: It is just the beginning and we have to see how this will mature, whether it will result in any cost or not. It could as well end without any cost. Even if there is a cost or liability it will be shared.
Sonia: How do you plan to synergise the emerging markets business because for Ranbaxy, the emerging market business continues to be loss-making including markets like Romania, what is the plan for Sun Pharma going ahead?
A: As we have shared in our press release and call, the closing of the deal, we take up to end of the current calendar year and would try and understand better. An integration committee will be put in place and will look at efforts by which country-by-country or market-by-market we would see as to how jointly we can synergise our efforts and improve the performance.
Interestingly, countries where Ranbaxy has a fairly strong presence, Sun Pharma has relatively modest presence in those markets and vise versa. So that way, the overall spread of business that we are getting in this combination is something which is very exciting and most of these markets are growing quite fast.
It is predicted that over the next decade or so, large part of pharmaceutical market growth will come from emerging markets and the kind of spread that we are getting here is something which is creating a platform for us to participate in this high growth of all the emerging markets.
Latha: Ranbaxy has a large number of products in various categories whereas Sun is the top-notch brand in the areas where it has services in India, will there be some trimming of the Ranbaxy portfolio to the Sun philosophy of being the top or not being there at all?
A: I think the idea of this combination is to utilize each other's strengths and grow the business further. I don't think trimming has even crossed our mind. They have strong products in quite a few areas and we have products that are, to an extent, an indifferent therapy areas. With seven classes of doctors, highest share in prescription, the combination takes us to 13 and so that is a huge benefit the combination will give us.
Ekta: With regards to the promoter holding or the subsidiary of Sun Pharma that picked up some amount of stake in Ranbaxy before the deal, how exactly would that stake pan out post the merger, would it be completely knocked off?
A: The scheme includes cancellation of these shares.
Ekta: What would be the strategy of both the companies now in order to resolve the US FDA issues that Ranbaxy has along with Sun Pharma on one of their plants?
A: In a way, the strategy does not change. Ranbaxy is committed to the consent decree and the remediation plan that they have and are continuing to do that. As far as Sun is concerned, we are very clear that the topmost priority is remediation getting back into compliance. So from that perspective, both the companies are completely aligned and by coming together and working together, experience of one company in handling such matters will only help the other company to get back into compliance. It will supplement the efforts. From that perspective, it would be very good for the combined companies.
Ekta: Since it is a merger, Sun Pharma's cash would still remain at the current levels of around USD 1.5 billion but what would be the transfer of debt that Ranbaxy would have to Sun Pharma's books? What would the balance sheet look like post the merger?
A: You are absolutely right. The cash that we have on our books will remain. Nothing changes there, the debt on Ranbaxy's books once we close and prepare a combined balance sheet would come on to the combined entity books and will be 800 million.
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